Tobacco Retailers: Coming Together

Tobacco shops and c-stores find common ground in a political world

This RYO set may look like it belongs in a tobacco shop, but it actually replaced 3 feet of grocery in one of Kocolene’s convenience stores.

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The competition: This is how many convenience store operators once viewed tobacco shops.

It’s easy to understand why. While cigarettes have been historically important to both channels, tobacco outlets have not been limited by self-service restrictions and typically have space to stock more SKUs than a c-store operator could dream of. And, as tobacco-centered operators, they have the luxury of training their staff to be experts in the finer details of the category.

Though this is still true today, retailers operate in a different world, one filled with legislative landmines on the national and local level; one in which anti-tobacco advocates target not just manufacturers, but also retailers; one in which social pressures, taxes and regulations have led to steep declines in cigarette sales, resulting in squeezed margins for the tobacco retailer.

In other words, a world in which tobacco shops and c-stores often find themselves on the same side.

That was certainly the belief of the founding members of the National Association of Tobacco Outlets (NATO) in 1997.

“The tobacco industry is so disliked, regardless of if you are a tobacco store, c-store or any other channel,” says Mary Szarmach, president of the NATO board and senior vice president of trade market and government relations for Smoker Friendly, Boulder, Colo. “The only way we will be able to continue selling these legal commodities is if we join together to battle the legislative issues that are attacking our industry daily.”

The similarities between the channels are all the more apparent as smoke shop and c-store owners begin to blur the lines: All of Smoker Friendly’s 86 company-run locations focus on tobacco, with 22 also offering fuel and other c-store staples.

Likewise, Lufkin, Texas-based Brookshire Brothers started out as tobacconists but now operate 32 c-store locations as well. Phil Metzinger, the company’s vice president of specialty beverage and tobacco, believes these convenience locations often benefit from its tobacco-shop strategies, and vice versa.

“I work closely with [the convenience] side of the business,” he says. “Tobacco really is the commonality; there’s a real tie.”

Retailers don’t have to operate stores in both channels to learn from the other side. These opportunities, such as networking at NATO events or seeking out individuals who have worked on both side of the fence, abound.

Andrew Kerstein, who owns and operates the Matawan, N.J.-based Smoker’s Haven chain of tobacco shops, is just one example of someone who has moved between the worlds of convenience and tobacco. Kerstein says he still uses strategies from his days as a c-store operator, making sure to stock popular products at the far end of the store so consumers have to walk past other potential impulse items on their way.

As the retail and regulatory environments present further challenges to the tobacco retailer, Kerstein—who served as the NATO board president through 2013—believes there is plenty the two sides can learn from each other. “There is much value in sharing strategies across retail segments,” he says.

Here are just a few strategies from tobacco-shop retailers—and c-store retailers who also operate tobacco shops—that might just work for a c-store.

Managing a Brave New World

One trend that spans both c-stores and tobacco shops is the explosion in popularity of OTP, driven by huge varieties and new products. Metzinger argues that this phenomenon is not unique to tobacco.

Since 2003 CSP magazine has ranked No. 1 in readership and market share over all other industry publications. C-store marketers have identified CSP as the preferred magazine source for their trade marketing communications. With industry-leading, highly targeted circulation to more than 100,000 subscribers, CSP reaches the key convenience retailing decision-makers fifteen times a year.